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Do I have an edge?
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Do I have an edge?

  #1 (permalink)
Trading for Fun
Yokohama South Korea
 
Futures Experience: Beginner
Platform: Sierra Chart
Broker/Data: CTS
Favorite Futures: gold
 
Posts: 105 since Nov 2012
Thanks: 94 given, 56 received

Do I have an edge?

here is my entire last week's trade record from 7/23 to 7/28, I want to analyse this, but not sure how to. could somebody please give some suggestions?

my biggest question is, based on this record, do I have an edge here?

if so, are there ways to improve my edge?

if not, why?

Edit: I have replaced the trade record with files in better formats. all trades are discretionary. currently I'm trading only 2 lots, taking off half at a fixed tick value, and trail the other half until the market takes me out. I want to test out alternative trade management strategies such as all-in all-out, or trade 3 lots and have 3 exit points instead of 2, and see how it affects the outcome of the trades. I really don't want to do this manually, does anybody know how to do it automatically or even semi-automatically?

Attached Thumbnails
Do I have an edge?-tradestatistics-2018.07.23-07.28.pdf  
Attached Files
Register to download File Type: xlsx TradesList 2018.07.23-07.28.xlsx (17.2 KB, 2 views)

Last edited by Sayounara; July 28th, 2018 at 03:58 AM.
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  #2 (permalink)
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  #3 (permalink)
Trading for Fun
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1 week of trade statistics is not a large enough sample for anything definitive , also the format of those stats isnt very clear

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  #4 (permalink)
Market Wizard
North Carolina
 
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If you make a profit over costs then that is the value of your edge. But, if you don't know or at least cannot even argue what your edge is then you probably don't have an edge. One of the problems, and I pointed this out before but system developers, myself included, basically will agree that statistics do not work well when applied to markets and then precede to use said statistics. Statistics can only invalidate systems that didn't work in the past.

Also, it is not just about having an edge, you need to know the variability of the edge to avoid blowing out. That's what gets most traders, who are over leveraged, it is not that they don't have an edge but that they cannot precisely bound the precision of their edge. One way to view the dynamics is basically there is a competition of leverage capacities. Leverage is very closely related to speed because typically as you increase your leverage your holding time will decrease. So, if you don't have enough leverage the it is similar to being too slow because traders with more leverage will be able to arbitrage whatever you see away. On the other hand, as you increase leverage and if you also use a tighter stop then you become more susceptible to gaming because it becomes easier for large traders, or the market as a whole, to run your stop and then even move to stage two which is to capture the edge you intended to capture.


Last edited by tpredictor; July 27th, 2018 at 10:41 PM.
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  #5 (permalink)
Hi Mom!
Bridgeport, Ct
 
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need mo

No way to tell with only a weeks worth of data. Why don't you give a general description of what you're doing with your trades?

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  #6 (permalink)
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charlotte nc
 
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I 100% agree with this comment here. "If you don't know or at least cannot even argue what your edge is then you probably don't have an edge". In trading an edge can be though of as the specific betting logic that you use to trade with that successfully overcomes the house edge. If you don't know 1. What the house edge is that you are betting against, and 2. What specific strategy you are employing to overcome this, you likely aren't quite there yet.

But no worries, you can work on your current system / strategy and refine it until you can quantify if it has an edge or not. You just need to define the rules of your system and see how it performs over time.

Like others have said, 1 week is not quite enough to definitely tell anything. Often times systems with larger risk can perform amazingly in the short term but blow up on just a few big trades. This nets the entire performance out, but the outlier statistics don't appear right away. Systems with a risk / reward ratio of 2x1 or higher often have this issue... So you really need a ton of data to know if your system really works.

Systems that run great in trending markets but fail in flat markets or vice versa can often have outlier statistics that kill you in the end. If your sample is only during market conditions that strongly favor your system, this can also be misleading.

The best way to evaluate a system is to pick a few different market conditions.

1. Strong trend
2. Flat / Range
3. Medium (Some Trend, Some Range)

Test your system in all 3 market environments over a bunch of trades and see how you did. Then isolate your trade performance against all 3 market types individually, then analyze the correlation. Did you kill it during trends, but get killed during ranges? Was your fill rate good when the market was slow, but really bad when the market moved fast?

Once you start analyzing everything into different buckets like this, you will find the answers you are looking for.

Best of luck!

Ian



tpredictor View Post
If you make a profit over costs then that is the value of your edge. But, if you don't know or at least cannot even argue what your edge is then you probably don't have an edge. One of the problems, and I pointed this out before but system developers, myself included, basically will agree that statistics do not work well when applied to markets and then precede to use said statistics. Statistics can only invalidate systems that didn't work in the past.

Also, it is not just about having an edge, you need to know the variability of the edge to avoid blowing out. That's what gets most traders, who are over leveraged, it is not that they don't have an edge but that they cannot precisely bound the precision of their edge. One way to view the dynamics is basically there is a competition of leverage capacities. Leverage is very closely related to speed because typically as you increase your leverage your holding time will decrease. So, if you don't have enough leverage the it is similar to being too slow because traders with more leverage will be able to arbitrage whatever you see away. On the other hand, as you increase leverage and if you also use a tighter stop then you become more susceptible to gaming because it becomes easier for large traders, or the market as a whole, to run your stop and then even move to stage two which is to capture the edge you intended to capture.


In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #7 (permalink)
Elite Member
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Not sure of the terms used.
138 trades is at least a beginning from a sample size perspective.
Tell us your average winner size ( in points) , average loser size (in points) , profit factor and win %.
Dont tell us in dollars as we want to rule out asymmetrical leverage effects.
Then we will be better able to comment.
Track those numbers over a further (say) 5 sets of 50 trades.
Then it will be clearer ( but not conclusive) if there is a maintainable edge in play or not.

I get depressed by how easily people are satisfied, with so little argument.

C Hitchens
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  #8 (permalink)
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Dr. Brett Steenbarger on how to know if you have a trading edge

TraderFeed: How Do You Know You Have A Trading Edge?

and more recently

https://traderfeed.blogspot.com/2018/05/the-dangers-of-false-knowledge.html

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  #9 (permalink)
Market Wizard
North Carolina
 
Futures Experience: Beginner
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Posts: 610 since Nov 2011
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Quoting 
I want to test out alternative trade management strategies such as all-in all-out, or trade 3 lots and have 3 exit points instead of 2, and see how it affects the outcome of the trades. I really don't want to do this manually, does anybody know how to do it automatically or even semi-automatically

@Sayounara I think you are on the right track. I think you will have to do this work yourself though. I have thought about building something but nothing yet. You can try tradervue or edgewonk (no association) but they didn't do everything exactly what I needed. I think there was another tool shared here in a thread but cannot remember the name. Please consider, also, that the ability to do the hard work-- if it were easy then the "edge" that comes would probably fade away. Trading multiple exit strategies, in general, will produce a blended performance of the two strategies. In general, if you have an edge, letting one contract run should produce a greater return at a higher standard deviation while taking your profit target should produce a more consistent but lower return. As for other considerations, it likely depends on how large your account is and how many contracts you can trade because the difference will be in how you capture the spread or not. For example, if you trade many contracts you could scale out and capture the "spread" at higher probability, simply because you are on more price levels where the market might reverse. On the other hand, you move all out then if you miss your limit order exit then you will lose the entire profit or have to exit at market. If you are trading a smaller account then probably sticking to the minimal leverage, i.e. 1 contract, will be the best course of action.


Last edited by tpredictor; July 28th, 2018 at 09:36 AM.
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  #10 (permalink)
Trading for Fun
Yokohama South Korea
 
Futures Experience: Beginner
Platform: Sierra Chart
Broker/Data: CTS
Favorite Futures: gold
 
Posts: 105 since Nov 2012
Thanks: 94 given, 56 received


I'm trying out the demo version of Edgewonk, but it doesn't seem to have the functionalities I require ...

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